Thursday, April 10, 2014

The FCC Should Not Preempt State Restrictions on Municipal Broadband

In the wake of the D.C. Circuit’s Verizon v. FCC decision, Federal Communications Commission Chairman Tom Wheeler laid out plans for the Commission’s approach to broadband. Those plans included a proposal to potentially preempt state restrictions on the ability of cities and towns to offer broadband services to their communities. At the Consumer Federation of America’s Assembly on March 21, Chairman Wheeler reiterated his plans to address state restrictions preventing state localities from building out municipal broadband services.

Chairman Wheeler should not move forward with these plans. First, Section 706 most likely does not provide FCC authority to preempt state laws. Second, government-funded networks do not bring real competition to localities and, most often, eventually cause more harm than good. Finally, the widespread failure of government-owned broadband projects proves that it would be unwise for Chairman Wheeler to push municipalities to pursue these often harmful ventures.

Nearly twenty states restrict local governments from entering into the business of providing broadband Internet service. These restrictions are sound policy, as they prevent local government conflicts of interest with the private sector, and they protect other local government programs and local taxpayers from the potential financial losses stemming from risky municipal broadband projects.

FSF scholars have discussed the problems stemming from government-owned broadband systems at length. In his February 26 Perspectives, Senior Adjunct Fellow Seth Cooper recently analyzed the legal implications of the FCC’s tentative plan to potentially preempt state-level restrictions on municipal broadband projects. Mr. Cooper found that “preemption would undermine local government accountability to state governments and to taxpayers” and “any attempt to interfere with the relationship between states and their local governments will run up against basic free market and federalism principles.” 

Federal law contains no clear statement authorizing preemption of state restrictions on their cities and counties going into the telecommunications or broadband Internet business. The U.S. Supreme Court has previously rejected federal preemption of state prohibitions on telecommunications services in Nixon v. Missouri Municipal League (2004). The Supreme Court expressly rejected claims that Section 253(a) of the Communications Act preempted a state statute prohibiting its cities and counties from offering telecommunications services. The Court based its decision on the "clear statement" rule and constitutional federalism problems posed by preemption of fundamental state sovereign functions. Also, a 1997 order by the FCC rejecting the preemption of a Texas restriction on local governments providing telecommunications services is an agency precedent that weighs against preemption.

Additionally, the principles of cooperative federalism dictate that a federal agency should not grant counties or cities powers that their respective states did not delegate to them. Chairman Wheeler’s February 19 statement, which included a proposal to examine “legal restrictions on the ability of cities and towns to offer broadband services to consumers in their communities,” has been characterized and reported as an effort to bring broadband to the citizens of municipalities. Municipalities are purely creations of the state. Municipal residents are citizens of the state. These citizens, as voters, indicate their political views, including whether they support legislation restricting municipal broadband initiatives, by electing certain state officials, from members of the state legislature all the way up to governor. FCC preemption of state-imposed restrictions on municipal broadband would impose on state citizens policies they do not support and would deprive them of recourse through their elected representatives.

While the D.C. Circuit arguably may have broadly construed the authority granted to the FCC under Section 706 in its recent Verizon decision, this authority is not likely to be as broad as the Commission's regulatory ambitions. And it most likely does not allow the FCC to interfere with state control over cities and counties to encourage broadband deployment absent a clear statement of intent by Congress. Constitutional principles, as well as Supreme Court and agency precedent, weigh against the legal support for FCC preemption of state restrictions.

There are also many fact-based reasons why preempting state restrictions on municipal broadband initiatives is unwise. In his March 7 Washington Times article, “FCC, Broadband and Fallacy of Government Competition,” FSF President Randolph May discussed how government systems thwart competition rather than enhance it, despite what Chairman Wheeler may believe. Mr. May concluded that “government systems pose inherent conflicts of interest with private-sector companies” by competing with them for rights-of-way, financing, and subscribers. And, these networks are generally subsidized directly by taxpayers or by government bonds carrying below market interest rates. Because building and managing broadband networks is not within the “traditional bailiwick and presumed competence” of local governments, these systems most often fail, and leave taxpayers and government bondholders “holding the bag."

I discussed the many examples of failed local government communications networks in a recent blog, including the recently publicized failure of Burlington, Vermont’s broadband network, Burlington Telecom (BT). For the past two years, BT has been fighting the claims of Citibank, its primary creditor, that BT owes it $33.5 million; the proposed settlement is for $10.5 million, which will be funded “largely” through non-taxpayer resources. Not surprisingly, the city has had to look to the private sector to help in funding the settlement.

Unfortunately, BT is only the latest failure in a longstanding pattern of money-losing municipal broadband projects. The towns of Mooresville and Davidson, North Carolina, faced multi-million dollar debts after acquiring the MI-Connection Communications System from the bankrupt Adelphia Communications cable systems. Utah’s UTOPIA network operated at a loss from 2003–2012, which caused “serious damage to the agency’s financial position” and resulted in total net assets of negative $120 million by 2011. Chattanooga, Tennessee’s Electric Power Board (EPB) network was built almost entirely at taxpayer expense. And last February, the Iowa state government sought to sell off its Iowa Communications Network. The Iowa network is one of the oldest government telecom systems in existence, but the debt it accrued over its history rendered the system unsustainable. Other municipal “broadband busts” include Provo, Utah, Lafayette, Louisiana, and the N.C. Eastern Municipal Power Agency.  Citizens Against Government Waste’s recent publication discusses these and other examples of poorly managed broadband networks, and CAGW urges the FCC not to push municipalities into competition with the private sector.  

In sum, Chairman Wheeler should not pursue his proposal attempting to “enhance competition” by encouraging governments to compete with private sector companies. There is plenty of evidence, both legal and factual, supporting the conclusion that preempting state restrictions on government-owned broadband systems is unsound and unwise. Instead, as Mr. May stated in his Washington Times article, “The proper way to encourage competition is to remove existing, costly regulations that no longer are necessary in today’s competitive communications environment and to refrain from adopting or threatening to adopt new ones.”

Wednesday, April 09, 2014

Maryland Still Compares Poorly to Other States’ Tax Climates


The Tax Foundation recently released the latest edition of its annual Facts & Figures 2014: How Does Your State Compare? The report ranks state tax rates and burdens in order to provide an objective perspective on how individual states measure up to a national average.

Maryland’s business tax climate still needs improvement. As I discussed in a blog last October, the Tax Foundation’s State Business Tax Index measures how each state’s tax laws affect economic performance. The Index named Maryland among the ten worst states with respect to its business tax climate. Maryland remained ranked 41st in the more recently released Facts & Figures report.

Additionally, Maryland received a poor overall tax climate ranking from the Tax Foundation’s Annual State-Local Tax Burdens Rankings. That report was released April 2 and uses the most recent data available as of January 2014. For each state, the report computes tax burden by totaling the amount of state and local taxes paid by state residents to both their own and other governments and then divides these totals by each state’s total income. 

In fiscal year (FY) 2011, Americans paid an average of 9.8% of their income in state and local taxes. Maryland ranked seventh highest in the U.S. for its state-local tax burden for FY 2011 (10.6%).
Maryland imposes a higher-than-average burden on its citizens and received a worse ranking than its local counterparts: Delaware ranked 15th (10.1%); West Virginia ranked 19th (9.7%); Virginia ranked 30th (9.2%). As a unique state-local entity, DC is not included in the rankings, but it would rank 20th (9.7%). For FY 2011, New Yorkers had the highest burden, paying 12.6% of their collective income in state and local taxes. New Jersey (12.3%) and Connecticut (11.9%) came in 2nd and 3rd, respectively. Wyoming (6.9%), Alaska (7.0%), and South Dakota (7.1%) had the lowest burdens.
States with high-earning residents tended to have the highest tax burdens. Maryland residents had the fourth highest average income in the U.S. in 2011 ($52,805). Maryland also had among the highest property tax burdens in America that year. Maryland ranked third highest in individual income tax collections per capita, trailing only New York and DC (and Maryland would rank second highest if DC is not considered). Maryland had the tenth highest individual income tax collections per capita as of FY 2012, which is a minor improvement from FY 2011.
While state and local tax burdens across the U.S. decreased on average in FY 2011, tax burdens increased in Maryland, Delaware, and DC. According to the rankings, “the driving force behind a state’s long-term rise or fall in the tax burden rankings is usually internal and most often a result of deliberate policy choices regarding tax and spending levels or changes in state income levels.”

As I urged in my last blog on state tax issues, it would be wise for Maryland to consider the success of other states, particularly its neighbors with lower tax burdens, and to implement changes to improve its local tax climate. In particular, if Maryland wishes to remain competitive with its neighboring states and prevent job losses, it should establish tax policies that attract and retain private sector businesses and decrease individual tax burdens.


Wednesday, April 02, 2014

Support Grows for Banning Internet Access Taxes Forever


Thanks to the Internet Tax Freedom Act of 1998, consumers have been able to benefit from access to the Internet free from state and local taxes for well over a decade. And, the digital marketplace has grown and thrived thanks, at least in part, to this access tax ban. However, in November of this year, the moratorium on Internet access taxes expires unless Congress takes action to extend the ban or make it permanent.  

In a Perspectives published in October of last year, I discussed the many positive effects of free Internet access. The current regime prohibiting Internet access taxes has fostered economic growth and investment, technological innovation, and broadband deployment and adoption. For instance, a 2011 McKinsey study ranked the United States as the most prominent country in the “global Internet supply ecosystem,” attaining more than 30% of global Internet revenues and more than 40% of net income. If an Internet access tax were imposed, the thriving Internet economy may be threatened.

Thankfully, support for a permanent moratorium on Internet access taxes has been growing in the House and the Senate. And, interest groups like MyWireless.org have made available a petition to allow the public to voice their support for continuing to ban Internet access taxes. The enactment of a permanent ban on Internet access taxes will promote the availability of information, continued technological innovation, and the economic success of the digital marketplace.

Snatching Victory From the Jaws of Defeat: Incentive Auction Should Be Win-Win-Win for Consumers, Government, and Industry


By Gregory J. Vogt, Visiting Fellow

The upcoming incentive auction, where a projected 120 MHz of spectrum may potentially be reallocated from TV broadcasting to mobile broadband, is a vital part of the Obama Administration's original goal of reallocating 500 MHz of spectrum for mobile broadband use. As described in this blog, this effort holds the promise of improving consumer welfare, meeting government competition and financial needs, and addressing the wireless carriers’ need for more spectrum. As others have done in the past, a recent paper by William Lehr suggests that competition should be the most important policy that should govern auction design. Although competition is important, the end result sought by these policy conclusions is misguided.

Given the potential defeat caused by a growing shortage of mobile spectrum, the incentive auction could be a jaw-snatching victory, a veritable win-win-win for consumers, government, and industry. All policymakers agree that obtaining the maximum amount of repurposed spectrum is critical to achieving the purpose of the incentive auction. So with this rare bipartisan policy agreement, what could possibly stand in the way of a resounding success?

Informal government statements have clouded the ability to achieve this purpose.  Chairman Wheeler has not announced whether he will recommend that the Commission place restrictions on bidder participation. But he has implied that he might ensure “that multiple carriers have access” to spectrum, referring to the Justice Department’s rather tepid speculation that large mobile companies, such as AT&T and Verizon, might be motivated to horde spectrum in order to “foreclose” competition. And both T-Mobile and Sprint have encouraged these statements by urging the FCC to restrict the amount of spectrum that the largest mobile broadband providers could bid for in the incentive auction. 

It would be bad public policy to introduce into the incentive auction an additional condition of “fairly distributing” spectrum among multiple carriers rather than simply auctioning the spectrum to the highest bidder. Such government manipulation might well prevent the incentive auction from achieving its overarching goal of maximizing the amount of repurposed spectrum, a concern which some broadcasters have raised

FCC history demonstrates that auctions with significant conditions, such as one that would steer license grants to a subset of participants, lengthens the time between auction and license grant, embroils the FCC in contested legal proceedings, and largely fails to achieve the purpose for which the targeting was imposed.

First, the 700 MHz D Block auction contained a restriction that the spectrum be dedicated to jointly providing a First Responder network and private mobile spectrum, including a minimum bid amount. The cost uncertainties surrounding the obligation most probably caused the failure to achieve the minimum bid amount. That spectrum is still not used 17 years later, but it is now slated for exclusive government use by the Middle Class Tax Relief and Job Creation Act.

Second, the C block of the same auction contained an "open access" requirement that obligated the auction winner to permit any device or application to be operated on the spectrum. These requirements have been compared to the 1960s era Carterfone decision that imposed an all-device obligation on monopoly wireline telephone companies. At the time of the auction, it was persuasively argued that the eventual auction price was $3.1 billion (or at least 40 percent) lower than would have been achieved without the restriction. Of course, under the D.C. Circuit’s recent decision vacating the net neutrality anti-discrimination and no-blocking rules, such an “open access” restriction has yet to be legally justified, particularly given the competitive broadband market. 

Third, the entrepreneur block of the PCS auction (also termed the C block) was reserved for companies that had less than $125 million in annual revenues and $500,000 in assets to promote participation by small businesses. A study by Fred Campbell has shown that the restrictions produced 61 percent less revenues than later unrestricted PCS auctions achieved. This same study and another by Tom Hazlet and Babette Boliek demonstrated that the restriction seriously delayed license grants, and many licenses were tied up in bankruptcy for years. Over half of the licenses had to be returned to the government. And perhaps most significantly, Mr. Campbell’s study showed that the restriction did not increase the long-term participation of small businesses, which largely transferred their licenses to existing players in the after-market. This, of course, meant that taxpayers were not fully compensated for the spectrum because the entrepreneurs received part of the proceeds.

Fourth, even designated entity ("DE") participation in auctions have produced skewed bidding results, often delaying the results of auctions. Given that small companies most often choose to sell their licenses rather than remain in the market for the long-run, it is doubtful that the purpose of the designated entity rule is being fully achieved. Although I express no opinion here on whether promoting access to spectrum for truly small entities outweighs the detriments, neither T-Mobile nor Sprint come anywhere even remotely close to being a very small entrepreneur defined as a designated entity. 

The following is a summary of these auction results.

Auction with Conditions
Reduced Revenues
License Delays
Litigation
Purpose
Achieved?
700 MHz F block (First Responder)
yes
yes
no
no
700 MHz C Block (open access)
yes
yes
no, but rule contested elsewhere
unclear
PCS C Block (entrepreneurs)
yes
yes
yes
no
Various auctions (DE)
yes
yes
yes
probably not

Broadcaster fears of achieving sufficient and timely auction payments likely will have a dampening affect on the amount of spectrum volunteered in the incentive auction. Because history demonstrates a high risk that significant bidder conditions will reduce government revenues, delay licensing, and fail to achieve their intended purpose, the government should stick to the goal all policymakers agreed to in the first place: promote the maximum amount of bidder participation. Refusing to adopt bidder restrictions is essential to meeting that goal. Failing to do so risks snatching defeat from the jaws of victory.

If it were up to me, I’d take the win.

Tuesday, April 01, 2014

Microsoft’s “Copyright and Consumers” Panel Highlights Copyright's Benefits


On March 27, Microsoft’s Innovation & Policy Center hosted a discussion focused on whether current copyright law properly balances the dual goals of the Constitution’s IP clause to incentivize creation and to properly protect authors’ works. And, how that balance has and will continue to benefit consumers. Overall, the panelists agreed that the Copyright Act has been successful in striking this balance, as evidenced by the great wave of new distribution technologies and business models that have emerged over the past few decades and the corresponding continued production of quality content by authors. However, panelists noted that this healthy environment could only continue to thrive if copyright is understood and respected by all parties in the copyright ecosystem.
Microsoft’s Tom Rubin, Chief IP Strategy Counsel, moderated a panel that included Joe Keeley, Majority Chief Counsel, Courts, Intellectual Property and the Internet House Judiciary Subcommittee; Shira Perlmutter, Chief Policy Officer and Director for International Affairs at USPTO; Troy Dow, VP and Counsel, Government Relations and IP Legal Policy and Strategy at The Walt Disney Company; Mitch Glazier, Senior Executive VP of the Recording Industry Association of America; and Sherwin Siy, VP of Legal Affairs at Public Knowledge.
The discussion began by reviewing the status of the comprehensive Copyright Act review announced by the Senate last spring, which is currently underway. Mr. Keeley emphasized throughout the discussion that the review of the law must be holistic and forward thinking, given the technological convergence and rapid innovation characterizing the copyright sector today.
Next, Shira Perlmutter discussed the multi-stakeholder reform process the Copyright Office initiated last year. The process began with a green paper released last July, which considered issues arising due to new digital technologies, and whether existing rights and exceptions are capable of addressing such issues. In areas where the law and marketplace practices seem mismatched, the paper considered whether legislative or other reforms would be necessary to promote continued development of the digital marketplace. Ms. Perlmutter emphasized the importance of non-legislative reforms to confront certain issues, including the DMCA’s notice and takedown procedure, and to address this issue she proposed a multi-stakeholder approach. Ms. Perlmutter stated the goal of this process would be a code of conduct or voluntary industry ‘best practices’ agreement.
Then, representatives from the software, video and television, and music industries discussed how copyright law and policy can both benefit consumers and enable innovations that promote access to works. Victoria Espinel noted that perhaps the most important, and exciting, development that software has enabled is the change in how consumers interact with content. Today software allows anyone with a phone or computer to be a copyright creator. Troy Dow stated that these and other innovations have benefited consumers by meeting their rapidly changing demands to be creators, or to access content anywhere, anytime. He noted that keeping pace with consumer demands by making content available on a well-timed, well-priced basis is the best way to disincentivize and prevent piracy. Mr. Dow also observed that copyright protection allows creators to take the required risks to find out what content consumers want, since more than half of all businesses, artists, or other ventures fail.
Mitch Glazier provided an especially interesting perspective, given the drastic and constant changes the music industry has confronted over the past 40 years. Mr. Glazier stated that copyright should get more credit for being the fundamental foundation for innovation. He explained how content drives the sale for technologies and devices, and that without copyright protection, patents would not be as important. He emphasized that copyright is often viewed as an inhibitor, but in fact, copyright enables creators to make compelling content by balancing incentives with protections.
Sherman Siy advanced an alternate view of copyright, arguing that the exceptions and gaps in copyright law, rather than the protections, are what incentivize innovative uses of content and technological developments. However, representatives from the software, movie and television, and music sectors seemed to agree that copyright protections and the exclusive rights granted to authors of works are what have enabled the risk-taking and innovation in copyright-driven industries.
Victoria Espinel in particular made an important observation. She found that there is a view that copyright has not kept up with the times, and the public’s perception of copyright has deteriorated. She explained that changes in technology and consumer behavior and the trend toward digital disintermediation have enabled consumers to be creators. As creators, consumers must understand law, whereas in the past institutional actors like record labels or movie studios were the only parties who really had to understand the law and its implications.
Ms. Perlmutter advocated the importance of educating the public and promoting awareness of copyright law and its benefits. She and Ms. Espinel agreed that consumers have a real role to play in determining how to reform copyright law and policy. Ms. Espinel emphasized the importance of garnering respect for copyright from consumers and institutional actors alike. Although the copyright marketplace is currently characterized by constant and rapid changes in technology, business models, and consumer behavior, copyright protection is still utterly relevant and important to the continued development of this vibrant sector and to maintaining the proper balance of promoting creation and protecting authors’ rights.
Free State Foundation scholars agree that retaining a strong IP system will provide incentives for creation of both content and distribution platforms and technologies, which is why we are in the process of publishing an ongoing series of papers exploring foundational principles of intellectual property. The five papers in this "Perspectives from FSF Scholars" series published to date are listed below:

No. 1: The Constitutional Foundations of Intellectual Property, by Free State Foundation President Randolph J. May and Research Fellow Seth L. Cooper

No. 2: Reasserting the Property Rights Source of IP, by Free State Foundation President Randolph J. May and Research Fellow Seth L. Cooper

No. 3: Literary Property: Copyright's Constitutional History and Its Meaning for Today, by Free State Foundation President Randolph J. May and Research Fellow Seth L. Cooper


Monday, March 31, 2014

Permissionless Innovation - Adam Thierer's Newest Book


Adam Thierer's latest book is titled, "Permissionless Innovation," a subject about which Adam has written knowledgeably for years.

In his book, Adam contrasts public policy shaped by “precautionary principle” reasoning, which he says poses a serious threat to technological progress, economic entrepreneurialism, and long-run prosperity, with “permissionless innovation." According to Adam,  permissionless innovation has been the secret sauce that fueled the success of the Internet and much of the modern tech economy in recent years, and it is set to power the next great industrial revolution—if we let it.

 heartily recommend this book to you, despite two "disclaimers." First, Adam is a former colleague of mine and present friend. Second, I haven't even had a chance to read the book yet.

No matter, really. I know Adam well enough -- and I know he knows the subject matter well enough -- that I am confident it will be a worthwhile read. Even more than worthwhile.

So, again, here is the link to the book.

Section 706, Wild Assumptions, and Regulatory Restraint

 
I was pleased that Federal Communications Commissioner Michael O'Rielly accepted my invitation to participate as a keynoter at the Free State Foundation's Sixth Annual Telecom Policy Conference on March 18. We engaged in an informative and interesting lunchtime Conversation, and I am grateful to Commissioner O'Rielly for indulging my questions.

I'm also grateful that C-SPAN broadcast the entire FSF conference. You can find the video of my Conversation with Commissioner O'Rielly here.

I commend to you the entire Conversation. But for now I just want to focus on Commissioner O'Rielly's discussion of Congress's intended meaning of now-famous Section 706 of the Telecommunications Act of 1996. In the post-D.C. Circuit Verizon case world, Section 706 is considered to be an independent source of authority for the FCC to regulate broadband Internet providers (and perhaps other market participants as well, the so-called "edge" providers). Tom Wheeler, the FCC's Chairman, has announced that the Commission will look to Section 706 for authority as it considers whether to adopt new non-discrimination and no-blocking rules, along with other regulatory actions.

Before taking his seat at the Commission, Commissioner O'Rielly spent almost twenty years in various congressional staff positions. At the time the Telecom Act of 1996 was being drafted, Commissioner O'Rielly served on the House Energy and Commerce Committee staff. According to his account, he was closely involved in the negotiations leading up to passage of the 1996 Act. In other words, as I said during our exchange, Commissioner O'Rielly had a "bird's eye" view of the drafting process, including that relating to Section 706.

To my mind, this makes what he has to say about his understanding of Section 706 worth contemplating – seriously.

As recounted by Commissioner O'Rielly, in order to accept the court's (and the FCC’s new) interpretation of what Section 706 means, you would have to make "some wild assumptions."

·      You would have to believe that a Republican Congress with a deregulatory mandate inserted very vague language into the statute to give complete authority over the Internet and broadband to the FCC, but then didn’t tell a soul. It didn’t show up in the writings, it didn't show up in the summaries. It didn’t show up in any of the stories at the time.

·      You would have to believe that the conference committee intended to codify Section 706 outside of the Communications Act, thereby separating it from the enforcement provisions of the Act, Title V, but somehow we still expected it to be enforced. [The Communications Act was not amended to include Section 706.]

·      You would have to believe that the congressional committees that went on to do an extensive review of FCC authority afterwards, and even proposed legislation to rein it in, in terms of FCC reauthorization legislation, that they went through that effort, but at the same time they had provided a secret loophole to the Commission to regulate.

·      You would have to believe that when Congress is having extensive debates over the ability to regulate, or the ability to give the Commission authority to regulate net neutrality, at the same time they had already given the Commission this authority.

·      You would have to believe that when Congress did legislate in this space, and more particularly when they legislated on certain edge providers in certain narrow instances mostly related to public safety, you would have to believe that they went through that extensive process, and then it didn’t matter, the fact that they had already given the Commission that complete authority under Section 706.

Commissioner O'Rielly's conclusion: "It's mindboggling to believe that all of those assumptions, and there are many more, are true. You would have to suspend your rational thought to get to that point." [The bullet points above are close to verbatim, but please feel free to listen to Commissioner O'Rielly in his own words directly in the video.]

I don't want to suggest that Commissioner O'Rielly's recounting of his personal knowledge of what went on behind the scenes as the 1996 Act was written, itself, should be considered determinative for a court construing Section 706. And I don't think Commissioner O'Rielly means to suggest that his personal recollections constitute official legislative history. Rather, the importance of what he relates is to show the irrationality – the arbitrariness and capriciousness, if you will, in administrative law terms – of adopting a novel interpretation of Section 706 that necessarily is based on so many implausible assumptions.

Commissioner O'Rielly's persuasive recounting shows that the court's – and now, apparently, the FCC Chairman's – interpretation of Section 706 not only is implausible, but far afield from what was widely understood to be the provision's original meaning – that the provision was not intended to constitute an independent grant of affirmative regulatory authority. Recall that this was the Commission's own understanding of Section 706 as well until the agency switched its view after its first foray into net neutrality regulation met with defeat in Comcast Corp. v. FCC.

In providing a convincing account of what Congress intended – and did not intend – Section 706 to mean, Commissioner O'Rielly has performed a valuable service. Even though, for now, the D.C. Circuit panel's opinion remains the controlling interpretation, it is important to remember that, other than holding unlawful the no-blocking and no-discrimination net neutrality rules, the court did not purport to define the boundaries of the Commission's Section 706 authority or adjudicate any particular exercises of such authority. The court did not require the agency to adopt any new regulations. Under all the circumstances – and especially the circumstance that there is no evidence of a present market failure or consumer harm resulting from Internet provider practices – there is no reason for the Commission to move forward at this time to adopt new net neutrality or net neutrality-like rules.

Indeed, under the circumstances, and having in mind the doubt cast on the validity of the D.C. Circuit's Section 706 reasoning by Commissioner O'Rielly's recounting, shouldn't this be an occasion for the FCC to exercise some (rare) regulatory humility?

In my view, it should be. The FCC Chairman should announce that the Commission will stand down and, as far as attempts to revive net neutrality regulations go, engage in watchful waiting. To adopt such a posture of regulatory restraint would not be a sign of weakness, but rather of wisdom.